Sunday, February 25, 2024

Today’s markets: Shares steady ahead of a busy week

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A quiet start to the week despite a lot of data coming over the hill. China is shut for the Lunar New Year holiday, offering some reprieve for stock markets that have not joined in with the record highs. European stock indices have been mixed at the open, with London sliding while shares in Paris and Frankfurt rose.

The S&P 500 rallied 0.57 per cent on Friday to close above 5,000 for the first time, with the Nasdaq and Dow Jones also coming off a run of five weekly advances. About 80 per cent of S&P companies that reported have beaten expectations. Of course, except for a handful of megacap tech stocks, the S&P 500 is in a sideways bear market. Thank goodness then for the AI revolution. Tesla hasn’t benefited from AI much but had a better week, up 5 per cent.

Nato pushed back against some rather bizarre remarks from presidential candidate Donald Trump. Here is Paul Donovan of UBS: “Markets to date are largely unmoved. Investors are not prepared to price scenarios for the November elections. While defence and trade policy fall under presidential commander-in-chief powers, fiscal policy will depend on Congress and the White House.” The US electorate faces the difficult task of choosing between men whose mental acuity is questioned, respectively, by his own Department of Justice and the rest of the Western world. Meanwhile, by-elections in the UK could show just how steep a task Prime Minister Rishi Sunak faces.

Markets remain focused on when central banks will start to cut rates. That puts a lot of emphasis on Tuesday’s inflation data from the US. In December, the CPI outstripped forecasts at 3.4 per cent versus 3.2 per cent anticipated, while the stickiness of core inflation remained evident as this came in at 3.9 per cent, down marginally from 4 per cent in November. The data is key to the Federal Reserve’s decision on when to cut rates – last week’s services PMI prices index pointed to the resilience of inflation and the problems of the ‘Last Mile’; markets have been dialling back expectations for a March cut, and the Fed may wait even longer. 

The European Central Bank’s Pablo Hernandez de Cos told a Cyprus newspaper that the March inflation and growth projections are important for determining when to cut. Fellow GC member Fabio Panetta said the time to cut was “fast approaching”. More ECB speakers are on the slate today, including chief economist Lane. There are also some Fed speakers, and we hear from Bank of England head honcho Andrew Bailey. Check also the NY Fed inflation expectations report due later. 

Geopolitical tensions remain supportive of oil prices, which are holding onto the bulk of last week’s rally. Brent futures tracking around $81.80 through a quiet Asian session quickly dumped to $81.25 at the open to test the 50-hour simple moving average (SMA). 

For everything else you need to know this week, click here

The Trader is written by Neil Wilson, chief market analyst at Finalto

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